What is Business Interruption Insurance?

What is Business Interruption Insurance?

Business Interruption Insurance is different from property damage insurance in that a property damage policy only covers the physical damage to the assets of your business.

Additional protection can be provided by taking out a business interruption cover which can insure the profits that would have been earned if the incident had not occurred. This allows for the consequential financial losses to your company and is just as important as any other cover that safeguards the survival of your business.

For example: Let’s say a business next to yours caught fire and it spread to your premises destroying both your premises and inventory. Your company will likely suffer and will not re-open for a significant period of time. This is when having a business interruption policy can assist by reimbursing your company for any profit loss as a direct result of the fire.

The profit reimbursement is typically based on an average of your company’s financial records, so it is imperative to keep these records accurate and up-to-date. You may be wondering how much coverage you need for your business and every business has different needs. However, policy limits need to be sufficient to cover the business for at least 12 months.

There is no universal answer as to how long the restoration period will take if an incident occurred, so you need to bear this in mind when taking out your policy.

A business interruption insurance policy typically covers:

Fixed or Variable Operational Costs:

Your business will have operating expenses along with various other costs that would continue to be incurred such as rent payments or utility bills.

Temporary Relocation Expenses:

Some policies may cover the extra expense of moving into a temporary location to operate while your existing business is under construction.

Key Staff:

Some policies will help you cover your employees’ wages in order to retain your key staff when a covered disruption keeps your business from generating revenue.

Need Business Insurance advice?

To discuss Business Interruption Insurance or any general Business Insurance requirements, please feel free to request a callback today and we will get in touch at a time that is convenient for you.